VW wants to cut component costs and still keep its peace with suppliers

Wolfsburg, Germany. Volkswagen is working hard to improve its relationship with its suppliers at the same time as cutting costs.

VW wants to cut 800 million euros from its production costs and the company expects its suppliers to help achieve that savings target.

The reduction is a crucial part of VW's ForMotion plan, which aims to trim 2 billion euros from VW's total costs.

VW has had problems with many of its suppliers since 2001. That is when VW started developing its capacity management, said Martin Hofmann, VW group purchasing director responsible for process and information.

"We have learned our lesson and have made major changes," Hofmann said.

One of those changes is VW's joint optimization of processing costs (PPO) initiative, which is designed to achieve more cost savings in cooperation with suppliers.

At the same time, Hofmann said that the VW board hopes that a "collaborative management of supplier networks" will result in higher quality and hasten production start-ups.

The next-generation Passat, which will be launched in 2005, should benefit from this.

Hofmann, together with Francisco Javier Garcia Sanz, VW management board member responsible for cutting production costs and Peter Wolters, group purchasing director responsible for supplier management, recently met with 20 suppliers in Wolfsburg to discuss communication issues.

VW recently appointed its first purchasing strategy manager: Slovenia-born Gorazd Vrbica. He and his team are trying to optimize VW's purchasing process.

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